Page 67 - IC23 life insurance application

UNIT LINKED PLANS:

These plans, normally hold the premium divided into two categories- that which is

meant to cover the life risk and the other which is invested in units in the market to

earn dividend. As we have said earlier, normal life insurance plans though do

charge for both life insurance and savings which is invested, it is not accounted for

separately in their books nor is the policy holder informed about this division.

Unit Trust of India is a mutual fund company and has floated the unit-linked plan in

collaboration with LIC. LIC has therefore, clamped certain restrictions on the UTI so

that UTI does not become an effective competitor. UTI's ULIP plan can not be for

duration longer than 15 years nor can it be for an amount more than 75,000/-.

However, it has an attraction for the investment-oriented people who believe that UTI

shall give them a better return than LIC. 'Insure the term, invest the rest' is an

argument quite often offered by such people. Insurance companies over the years,

have earned expertise in the investment of funds. Therefore, a mutual fund can not

always be better than a life insurance company. The present stock market

conditions amply prove this argument. Even an individual may not be able to perform

better in the stock market.

Besides life insurance is meant to substitute certainty for uncertainty. Investments in

the market can be highly frustrating in a depressing market. On the other life

insurance companies are much more cautious and take extra care to protect a

minimum value, and do not take too much risk.

Copyright Dr Rakesh Agarwal Sashi Publications Private Limited

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